PAGA Is A Representative, Not A Class Action, And So Judge Gets To Decide Whether PAGA Action Is Subject To Arbitration.
Defendant and employer Garden Fresh Restaurant Corporation petitioned for a writ of mandate seeking a writ directing the trial court to vacate part of an order leaving it to the arbitrator to determine whether the plaintiff employee and defendant employer had agreed to class or representative arbitration. “The question that Garden Fresh’s petition presents is: who decides whether an agreement to arbitrate disputes between the parties to the agreement authorizes class and/or representative arbitration when the contract is silent on the matter – the arbitrator or the court?” Garden Fresh Restaurant Corporation v. Superior Court, D066028 (4/1 Nov. 17, 2014) (Aaron, Huffman, McIntyre).
Answer: the court does.
This is the second recent California decision rejecting the plurality conclusion in the SCOTUS case Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003) (plurality opinion) (Bazzle) that the availability of class arbitration is not a question of arbitrability, and thus not a “gateway issue” for judges to decide. Garden Fresh Restaurant Corporation is thus consistent with Network Capital Funding Corporation v. Papke, which also rejected the non-binding plurality reasoning in Bazzle. I posted about Network Capital Funding Corporation on October 13, 2014.
Regarding the arbitrability “gateway” issue, Garden Fresh Restaurant Corporation does not distinguish between class actions, and representative PAGA actions. Therefore, a judge also gets to decide as a “gateway” issue whether the parties agreed to arbitrate representative claims, such as a PAGA claim, in the face of a silent arbitration provision. (We note that the Court also drops a footnote 3, suggesting that based on language in Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014), “one might reasonably conclude that a court could never compel arbitration of a PAGA claim unless the state, as opposed to the individual plaintiff, had entered into an arbitration agreement with the defendant.”)
COMMENT: If the reasoning in Iskanian and Garden Fresh Restaurant Corporation continues to be good law, it could have far-reaching consequences, not just for the courts, but also for the Legislature. For example, by creating consumer statutes that provide for more “representative” actions in which the private party acts for the state as a private attorney general, the Legislature might be able to expand consumers’ opportunities to litigate rather than arbitrate their claims – leaving it to the courts to decide whether the representative action allows for bilateral arbitration. This could lead to an end-run around the growing body of law that permits class action waivers in arbitration agreements.
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